On Thursday, the UAE began implementing the tax, as part of its efforts to increase non-oil revenues while maintaining its position as a regional trade center.
And the Ministry of Finance said, in new regulations it published today, Thursday, that qualified entities in more than 30 free zones in the Emirates, and that export goods worth tens of billions of dollars to neighboring countries, will be subject to zero percent tax even when dealing with the state in strategic activities such as manufacturing and processing. Goods and logistics.
In response to a question from the media whether tax exemptions would encourage companies to move to free zones, Shabana Aman Khan, Executive Director of Tax Policy at the Ministry of Finance, said, “The system is designed to ensure the prosperity of strategic sectors in free zones.” “A certain level of migration may occur, but the overall goal is to ensure that the UAE remains attractive,” she added.
The government says it adopted the corporate tax in line with international efforts to combat tax evasion, as well as to address the challenges arising from the digitization of the global economy. The UAE does not impose taxes on individual income.
The countries of the Gulf Cooperation Council gradually began to adopt tax reforms after they usually relied on financing their budgets on the revenues of hydrocarbons. In 2017, the Council approved the adoption of value-added tax.
The 9 percent rate imposed by the UAE on corporate income of more than 375,000 dirhams (about $100,000) is the lowest in the GCC, with the exception of Bahrain, which does not impose a general corporate tax.
According to consulting firm PricewaterhouseCoopers (BWC), Saudi Arabia imposes a tax of 20 percent, Qatar 10 percent and Kuwait 15 percent on foreign-owned companies, and Oman applies a 15 percent corporate tax.
Mohammed Rasool, CEO of Amana, a medium-sized financial services company based in the UAE, said in a report to Reuters that the corporate tax is a natural step for the UAE to keep pace with best practices in the world.
“It will be essential to ensure that the economy remains competitive both regionally and globally… But let’s be clear, the tax rate does not seem very high, especially compared to what companies have to offer elsewhere in the world,” he added.
Starting today, companies will be subject to corporate tax at the beginning of their fiscal years, which means that the impact of tax revenues will not be tangible before 2025.
The tax imposed by the UAE coincides with a new global minimum corporate tax set by the Organization for Economic Co-operation and Development and ratified by 136 parties, including the UAE, to ensure that large companies pay at least 15 percent of their income and make tax evasion more difficult.
UAE law imposes zero percent tax on corporate income of less than 375,000 dirhams and nine percent on corporate income that exceeds that limit, with exemptions for smaller income earners and no taxes on personal income from employment, investment and real estate.
“They wanted to make it as supportive as possible for small and medium enterprises and startups. At the same time, they don’t want to encourage companies to move away from the UAE,” Wassim Shaheen, head of the corporate tax unit at KPMG Audit and Consulting Services, told Reuters.
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